With an increased demand for ESG transparency from investors, here is a portfolio manager’s perspective on the future of Responsible Investing in shipping.

Responsible investing (RI) is defined as an investment process that incorporates environmental, social and governance (ESG) factors into its approach. Such an approach enables investors to align their investments with global trends that are changing the investment landscape.

On the other hand, increased regulatory requirements, ever-changing market trends, and greater demand for transparency pose a huge challenge for shipping companies to get on board with the industry’s sustainability agenda. 

With investors and banks not taking ESG measures lightly, they are interested to know how ESG and other non-financial measures are shaping a company’s strategy, operations, and long-term prospects.

Find out more what the future of RI might look like in this quick chat with Hubertus Clausius, Portfolio Manager and Managing Director of Seahawk Investments.

Q: What are some of the top responsible investing trends in shipping in the past year?

A: An increasing number of large publicly listed consumer goods companies have committed to using zero-carbon solutions for their ocean transportation needs. Given the increased regulatory pressure and changing demand landscape, more newbuilds have been ordered with lower carbon-emitting LNG and other alternative propulsion systems.

Q: What are some of the ESG risks involved in responsible investments in shipping?

A: It is difficult to foresee which alternative propulsion systems will prevail at this point in time. Another area of uncertainty is the availability and future cost trends of alternative fuels (i.e., methanol, ammonia, hydrogen etc.) Additionally, the cost of both LNG-based and carbon-neutral new alternative propulsion systems in newbuilds are significantly higher than traditional fossil fuel-based solutions.

Investors and shipping companies can hedge their risks by engaging in longer-term charter agreements with ESG-focused customers. Many newbuilds can be ordered with dual fuel propulsion systems, thereby mitigating some of the technology risks.

– Hubertus Clausius, Seahawk Investments

Q: How can investors identify these risks and stay ahead?

A: Investors and shipping companies can hedge their risks by engaging in longer-term charter agreements with ESG-focused customers. Many newbuilds can be ordered with dual fuel propulsion systems, thereby mitigating some of the technology risks.

Q: What is the biggest challenge that shipping must overcome in terms of responsible investing?

A: The biggest challenges are the cost element and the customer’s willingness to initially pay for more expensive propulsion systems and more expensive fuels.

Q: Ultimately, do you think responsible investing can be a reality for the shipping industry?  

A: Financial institutions are increasingly inclined to focus on financing modern carbon saving vessels. Coupled with the introduction of a taxation system on carbon emissions, it would automatically foster the competitiveness of alternative fuel systems in the maritime industry.

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